DOES THE LONG-TERM INTEREST-RATE PREDICT FUTURE INFLATION - A MULTICOUNTRY ANALYSIS

According to the Fisher hypothesis, an increase (decrease) in the spre ad between the long-term, or multi-period, interest rate and the one-p eriod inflation rate signals an increase (decrease) in future one-peri od inflation. This implication is tested on data from thirteen OECD co untries for the period 1962-1993. Integration and cointegration techni ques are applied to examine the time-series properties of interest rat es and inflation rates, and the VAR methodology developed by Campbell and Shiller (1987) is applied to examine the predictive power of the s pread, as well as in testing the Fisher hypothesis under rational expe ctations and constant ex ante real rates.